Money Mavericks: Confessions of a Hedge Fund Manager

When I heard about Kroijer’s book during a Bloomberg interview, I knew that reviewing his work would be an interesting project. I share many similarities with his experience (even though I must admit he has reached a higher level of assets under management than I have so far) and I was curious to learn about his full perspective.

In his book, Harvard MBA Kroijer describes his experience in leaving a high-paying job in finance when he was barely 30 years old to start his own hedge fund. His talent seemed under no dispute and his timing was certainly quite good (lucky?) as he picked the bottom in 2002 to launch.

Kroijer spends a large portion of the book discussing and remembering the concurrent excitement and humbleness of getting his fund off the ground. He eventually launched with a mere and much disappointing $3.5 million which gave rise to many funny stories on how little he was in an industry that thrives on constant machismo.

I could not help but remember my own humble beginnings founding Cervino Capital Management, and felt somewhat empathetic for Kroijer. An especially funny memory hit me when reading this book—I had just started out and while Cervino was just a tiny blip in the investment community, I felt like a million bucks. I was back in the hedge-fund game and had just resigned from a position with a large bank where I felt imprisoned. One night, I was sitting at a dinner party at the home of Henry Sloane, who at that time was the head of MGM. My wife and I sat next to a lovely and very understated couple; after the routine chit-chat on the evening event, the man asked me what I did for a living. I thought you would never ask, I thought to myself and proceeded to give him my most proud introduction: “Well, I am managing director at a boutique investment firm where we trade sophisticated alternative strategies around financial derivatives….and what do you do?” At this point I was expecting something like, “Oh I am a writer; I just sold my script to Henry.” Instead he replied with a big smile, “Great…I run a $6 billion dollar bond fund downtown. How much do you guys manage?” I wanted to hide under the table and never come out. “Well, we just launched,” I said sheepishly, and quickly changed the subject to the wine we were savoring.

Kroijer went on to build a medium-sized fund with a good risk-adjusted return until 2007 when, under much pressure from investors to increase the gearing of his investments, he ended up suffering his worst run at the highest level of leverage. By the end of 2007, with a negative return for the year, he closed shop and moved on to write this book.

He spends the last part of the book elaborating on the state of the industry, its overall usefulness, and the problem with fees and structure—all issues I mostly agree with.

I often get asked by my students about my hedge-fund experience and the industry overall, an industry that still carries an enormous appeal among MBAs. For those who would like to hear another candid voice on the subject, I certainly recommend Kroijer’s work. For a broader and more historical overview of the hedge fund universe, I would also recommend the book More Money than God by Sebastian Mallaby.